Vietnam, Philippines attract VCs deterred by pricey Indonesian market

The Philippines and Vietnam have the same narrative in many ways: a growing gross domestic product per capita, young and large populations of over 100 million, and large foreign investments.

Image credit: Timmy Loen

The latter is what especially excited Vinnie Lauria, founding partner at Golden Gate Ventures (GGV), who oversaw the establishment of the VC firm’s office in Vietnam.

“When you have the Apple and Google [brands] of the world bringing their manufacturing factories in the country, then that spills over to the economy. And that increases the spending power of the people here,” Lauria tells Tech in Asia. “So if I was investing in Indonesia in 2018, I would invest my money in Vietnam right now.”

As interest in Indonesia has pushed the valuation of local startups to levels where they have become uncomfortable for some investors, the search for other market opportunities in Southeast Asia becomes more urgent.

“There is a lot of capital, especially for early-stage startups dedicated only to Indonesia, and that pushes valuation up,” Lauria says. “This is where markets like Vietnam and the Philippines are quite attractive because they are not overvalued. They don’t have too much capital chasing too few deals.”

Golden Gate Ventures’ Vinnie Lauria / Photo credit: Tech in Asia

That said, both the Philippines and Vietnam have already been touted as “the next Indonesia” over the last few years. Yet, funding for startups in these two countries is still far less than what their counterparts in Indonesia get.

So why aren’t international investors opening up their wallets? And will high valuations in Indonesia give startups in Vietnam and the Philippines an edge to attract more investor attention?

Eye on the exits

The current macroeconomic conditions, from high-interest rates to geopolitical tensions, are some of the reasons why many investors outside of Southeast Asia remain hesitant to bring their money into the region, Boon Ping Chua, partner at Cento Ventures, a series-A focused investor based in Singapore, tells Tech in Asia.

“Investors have always been excited about the demographics [of Vietnam and the Philippines]. But you can’t just provide potential, you have to deliver,” he adds.

Tech in Asia data shows that Indonesia has about three times more exits, in the form of mergers and acquisitions or public listings, than Vietnam and the Philippines combined from 2016 until 2023.

The lack of exits in Vietnam and the Philippines – and in Southeast Asia as a whole – leaves investors to “wait and see,” Chua says.

Not so easy doing business

Can they rise to the challenge?